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  1. 1. From Idea to Business contents Business Planning and Research Business planning and research From Idea to Business Business Checklist 1-3 The Business Plan – Your Road Map to Success 1-4 » Personal Financial Statement Worksheet » Business Startup Costs Worksheet » Pro Forma Cash Flow Analysis Worksheet » Balance Sheet Worksheet » Income Statement Worksheet » Competitive Analysis Worksheet While every effort has been made to ensure the reliability of the information presented in this publication, the Arizona Department of Commerce cannot guarantee the accuracy of this information due to the fact that much of the information is created by external sources. Changes/updates brought to the attention of the Arizona Department of Commerce and verified will be corrected in future editions. Top Success Factors To Succeed In Business – Life is about relationships; build and nurture them. – Character and integrity are critical in all matters. – A disagreement is an opportunity to work together to solve a problem. – Be accessible and be a good listener. – Can’t is not in my dictionary. Frank C. Rivera, President/CEO, ATL, Inc. www.azcommerce.com 1-2 Arizona Entrepreneur’s Edge
  2. 2. business checklist Step-by-Step Checklist to Start, Business planning and research From Idea to Business Operate and Grow a Business in Arizona T he Arizona Department of Commerce’s A business’ growth pattern typically follows these stages: free online program provides you with a customized step-by-step checklist for Conception – Entrepreneurs determine the feasibility of their new what you need to know, whom you need to business by evaluating the needs of the market, the potential contact and where you need to go for business profitability, and the availability of needed resources. licensing, registration, tax requirements, funding, hiring, certification, procurement Starting – Once the business is launched, cash is usually tight. opportunities and much more. Customer responses validate the business concept and marketing The process of going through the program efforts, but the business usually struggles to find its competitive generally takes 5-10 minutes to complete. In advantage. All activities are focused on increasing sales. addition, at any given time, you may click on “My Report” to view your customized checklist. Operating – Sales and profits are usually increasing as a result From your customized checklist, you will be of new customers and expanding markets. Cash flow, staffing, able to link over and download most of the and developing systems may be issues because of the costs and forms you may need. It also provides you with considerations of growth. telephone numbers and addresses in the event that you wish to contact an agency or Growing – As a result of competitive markets, sales either hit their organization directly. Visit the website at highest point or level off. Profits may decrease as prices are lowered http://www.azcommerce.com/smallbiz, and to compete. Customer retention and managing resources are keys click on “Step-by-Step Checklist to Start, for growth. Operate and Grow a Business in Arizona.” Choosing the right professional partners to work Business Checklist Follow the steps outlined below to get your business off to the right start: with, including your accountant p Conduct research on your industry, target market and competition. and attorney, can make the difference p Prepare a written business plan complete with financial statements. between failure p Establish a source of adequate and reliable financing. and success. Get recommendations p Retain an attorney and CPA, if appropriate. and do research. p Decide whether you wish to operate as a sole proprietorship, partnership Don’t hesitate to ask or corporation. a lot of questions to determine whether p Check on zoning ordinances. their expertise p Select a suitable location. matches your needs. Agree upon costs p Choose a name, research the availability and register. upfront and then build those into p Obtain a Federal Employer Identification Number (EIN), if needed. your financial plan. p Find a bank that’s right for you. Open bank accounts. p Acquire necessary licenses and/or permits for state, county and/or city. These people, who have had the benefit p See insurance agent for full range of coverage. of seeing other fledgling businesses p Obtain bonding and insurance, if necessary. such as yours grow p Arrange for utilities, telephone and other services. over the years, can provide invaluable p Review all labor regulations, if hiring employees. guidance. p Choose a record keeping system and method of inventory control. Arizona Entrepreneur’s Edge 1-3
  3. 3. the business plan The Business Plan Business planning and research From Idea to Business Your Road Map to Success Purposes of the Business Plan A s a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business. As a management tool, the business plan helps you track, monitor, and evaluate your progress. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments. As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster a broader understanding of where the business is going. Before you begin writing your business plan, a precise explanation of your business’ unique consider the following four core questions: qualities that set it apart from the competition. » What service or product does your This section should include key points from Your business business provide and what needs does marketing, operational and financial plans. Your plan represents it fill? explanation should answer these questions: your “road map” » Who are the potential customers for » What does your business do? toward a successful your product or service and why will » In what general market does your venture. they purchase it from you? business compete? » How will you reach your potential » What quality/price image will your The following customers? business have? guidelines do not » Where will you get the financial » What customer needs are met? address every resources to start your business? » What makes your business unique aspect of every from competition? possible business Elements of a Business Plan » Why will your business be successful plan. You should I. TITle PAge financially? consider more The title page should contain the following questions than items, double-spaced, horizontally-centered and Iv. mArkeTIng PlAn those posed in positioned just above the center of the page: This section should contain a narrative each section. Be » Business name description of these factors: sure to ask many » Address questions – your » Telephone number(s) A. Product/service success depends on » Owner(s) name(s) » What needs/benefits are sought by your the completeness customers? of your planning II. TABle Of COnTenTs » specifically, how does your product/ process. The table of contents should list the title of each service meet those needs/benefits? section of the document and indicate the page » How is your product/service unique number where each is located. It also should list from the competition? SBA’s Small specific support items (appendices) by name. » What customer services do you provide Business Training This page will be done last, since it requires to support the central product/service? Network presents the entire document as input. It allows the an online course reader to quickly locate specific sections. B. Target market “How to Write a First, determine if your focus is on Business Plan” at III. BusIness COnCePT consumers (end-users) or other businesses. http://app1.sba. gov/training/ Or exeCuTIve summAry Then tailor your responses to the following sbabp/index.htm The Business Concept, or Executive Summary, appropriate category. should be a one-page explanation of what your » What needs/benefits are sought by your business is and its competitive advantage. customer that your product/service Here you will provide a clear description of satisfies? the industry in which you are competing and » When and under what circumstances 1-4 Arizona Entrepreneur’s Edge
  4. 4. the business plan does your customer buy your product e. Price Determination Business planning and research From Idea to Business or service? A description of the price structure for your » Describe the volume and frequency of product or service will answer the following your customer’s purchases. questions: » Based on available data, what is the » How does the unit cost of your product expected volume of your target market? compare to the relative value seen by » Of that target market, what is the the customer? projected volume of actual paying » How does your price compare with the customers? competition price? » Describe your customer base. » Why will customers pay your price? » What image will this price project? Consumer: It is important for you to develop » What special advantages do your a clear, mental picture of your ideal customers. customers get that is included in the price? Describe your potential customers using the » Will you offer credit terms? following factors: age, sex, income, education, location, occupation, interests, buying f. marketing Approach habits, and goals and aspirations. A description of your marketing effort should answer the following questions: Businesses: If selling to a business, your » What are the test market results? description should include type of business; » Where do your customers seek information size of business; priority placed on purchasing about purchasing your product/service? your product/service; projected image of the » How will your image be clearly and business; markets that the business services; consistently conveyed to potential buyers? its trade organizations and memberships; » Which media are most suitable? and the trade publications read. » How will you evaluate the effectiveness of each advertising and promotional effort? C. Competition » How will you use/evaluate a sales staff? A description of your competition should answer the following questions: v. mAnAgemenT PlAn Or » Who are your major competitors? OPerATIOnAl PlAn » Why are they successful? This section contains a description of who » What alternatives are there to your will run the business and how they will do it, product? including the following: » How do alternatives impact your sales? » What distinctive differences separate A. management Team you from your competitors? A description of how the business will be » Why should customers leave your managed will answer these questions: competitors to choose your product/ » What business management back- Note: Include in service? ground do you have? the appendix a » What market share do you expect to get? » How will that drive the business? photograph of the » How is the experience of key people building, a drawing D. location Analysis related to this type of business? of the immediate Describe your business location and how it » What legal form will you use – corpora- area showing will enhance the sale of your product or tion, partnership, sole proprietorship? road access and service. » Who does what? Who reports to whom? identity of adjoining Your description should answer the » What resources are needed and who will businesses and following questions: provide them (accountant, lawyer, etc.)? a drawing of the » What strategic advantages do you have floor plan of your at this location? B. employee relations business. » Is there opportunity for expansion? A description of your methods of hiring, » What are the neighboring businesses? training and communicating with your staff Note: Include in » Do they complement/detract from will answer these questions: the appendix the yours? » What are your personnel needs? resumes of » Are renovations needed? At what cost? » What skills will be required? key personnel. » What is the zoning classification? » How will you hire and train? » Is the neighborhood stale, changing, » What salary/benefits will be provided? improving, deteriorating? How? » How will you determine wage increases? » How is customer access, parking, etc.? » What personnel policies will be provided? Arizona Entrepreneur’s Edge 1-5
  5. 5. the business plan C. Operational Controls This strategic plan should focus on years Business planning and research From Idea to Business A description of the kinds of management two through five and include descriptions of systems and how they will be used will the following items: answer these questions: » strengths within your organization » What is your production capacity? » Weaknesses within your organization » What operating advantages do you have? » Opportunities available to you » What elements are key to your success? » Threats impeding you » How will you monitor these factors? Using these four factors, you should » What hazards do you anticipate for describe strategies that use your strengths to your business? What protection and/or take advantage of opportunities and overcome alternate plans do you have? threats; and strategies to reduce weaknesses » What policies will you establish for the and avoid threats to your business. operation of your business? The strategies should identify intermediate goals (yearly) and the marketing, management vI. fInAnCIAl PlAn and financial resources to achieve these goals. A description of how your business will be financed and how you will maintain a sound financial condition will answer the following questions: Research Resources » Arizona Department of Commerce, Small Business Services A. Current funding requirement http://www.azcommerce.com/smallbiz » How much money will be needed for starting your business? » Arizona Department of Commerce, » What will be the sources of startup Office of Economic Information and Research capital? http://www.azcommerce.com/research » What business and personal assets will be pledged as collateral? » The Center for Competitiveness and Prosperity Research at Arizona State University’s W.P. Carey School of Business B. use of funds http://www.cob.asu.edu/seid/cbr » How will the money be spent (working capital, capital expenditures, etc.)? » JP Morgan Chase Economic Outlook Center in » How will borrowed funds make your Arizona State University’s W.P. Carey School of Business business more profitable? http://wpcarey.asu.edu/seid/eoc C. long-range financial strategies » Arizona Rural Policy Institute (ARPI) of » How will you liquidate your investors’ Northern Arizona University, College of Business Administration position? http://www.franke.nau.edu/rPI » What terms of repayment are feasible? » What will you do if repayment cannot » The University of Arizona Center for Computer and Professional be accomplished as planned? Education http://www.ceao.arizona.edu/comped D. financial statements » Economic Development Information Center (EDIC) To support this section, several financial http://www.lib.az.us/extension/edic.cfm statements will be required, such as the following: » Personal financial statement of owner Visit your local library » Business startup costs It’s a great resource for starting or running a business. » Pro forma cash flow analysis (expected) Librarians will help you find information on every phase of business » Balance sheet (actual or proposed) ownership, information on writing the business plan and electronic » Income statement (actual or proposed) databases where you can research industries and competitors. » Competitive analysis The library provides access to subscription databases you can use in the library, office or home when you obtain a library card and a PIN See worksheets on the following pages number. In addition, libraries provide free access to the Internet. Many vII. sTrATegIC PlAn libraries present free programs, workshops and book lists on business It is very important to include a description of topics. where you want your venture to be in the next few To find your local library, visit the website at years and how you intend to achieve those goals. http://www.lib.az.us/libdir. 1-6 Arizona Entrepreneur’s Edge
  6. 6. worksheets Business planning and research From Idea to Business Personal Financial Statement Worksheet As of: __/__/_____ Assets Amount in Dollars Cash - checking accounts $______________ Cash - savings accounts $______________ Certificates of deposit $______________ Securities - stocks / bonds / mutual funds* $______________ Notes and contracts receivable* $______________ Life insurance (cash surrender value) $______________ Personal property (autos, jewelry, etc.)* $______________ Retirement funds (IRAs, 401k, etc.) $______________ Real estate (market value) $______________ Other assets (specify)* __________________________________ $______________ Total Assets $______________ liabilities Amount in Dollars Current debt (credit cards, accounts) $______________ Notes payable* $______________ Taxes payable* $______________ Real estate mortgages* $______________ Other liabilities (specify)*__________________________________ $______________ Total liabilities $______________ net Worth $______________ *Describe in the appropriate section below. 1. Describe securities - stocks/bonds/mutual funds: 2. Describe notes and contracts receivable: 3. Describe personal property: 4. Describe other assets: 5. Describe notes payable: 6. Describe tax liability: 7. Describe real estate mortgages: 8. Describe other liabilities: Arizona Entrepreneur’s Edge 1-7
  7. 7. worksheets Business planning and research From Idea to Business Business Startup Costs Worksheet As of: __/__/_____ living expenses From last pay check to opening day $ ___________ For three months after opening day (startup cushion) $ ___________ Deposits, licenses, Prepayments Deposit for rent $ ___________ Telephone and utilities $ ___________ Business licenses $ ___________ Insurance premiums $ ___________ leasehold Improvements $ ___________ Remodeling and redecorating $ ___________ Fixtures, equipment, displays $ ___________ Installation labor $ ___________ Signs – outside, inside Inventory Service, delivery equipment and supplies $ ___________ Merchandise (approx. 65% of startup costs are invested in opening stock) $ ___________ Operating expense for the first 3 months (From Cash Flow Projection) $ ___________ reserve to Carry Customers’ Accounts $ ___________ Cash for Petty Cash, etc. $ ___________ TOTAl sTArTuP CAsH neeDs $ ___________ 1-8 Arizona Entrepreneur’s Edge
  8. 8. worksheets Business planning and research From Idea to Business Pro Forma Cash Flow Analysis Worksheet As of: __/__/_____ Cash receipts Cash Sales $ ___________ Cash from Accounts Receivable $ ___________ Cash from Investments $ ___________ Total Cash receipts $ ___________ Cash Disbursements Merchandise, inventory $ ___________ Salary and wages $ ___________ Outside labor $ ___________ Payroll taxes $ ___________ Advertising $ ___________ Car and delivery $ ___________ General office administration $ ___________ Legal and accounting $ ___________ Operating supplies $ ___________ Bad debts $ ___________ Rent $ ___________ Repairs and maintenance $ ___________ Utilities $ ___________ Insurance $ ___________ Taxes and licenses $ ___________ Loan payments (principal and interest) $ ___________ Total Cash Disbursements $ ___________ neT CAsH flOW (+/-) $ ___________ Note: This analysis should be done on a monthly basis for the first year and on a quarterly basis for years 2 and 3. Arizona Entrepreneur’s Edge 1-9
  9. 9. worksheets Business planning and research From Idea to Business Balance Sheet Worksheet As of: __/__/_____ AsseTs Current Assets Cash in bank $ ___________ $ ___________ Accounts receivable $ ___________ Inventory $ ___________ Other current assets $ ___________ Total Current Assets $ ___________ fixed Assets Machinery & equipment $ ___________ Furniture & fixtures $ ___________ Land & buildings $ ___________ Other fixed assets $ ___________ Total fixed Assets (net of depreciation) $ ___________ $ ___________ TOTAl AsseTs $ ___________ lIABIlITIes AnD equITy Current liabilities Accounts payable $ ___________ Interest payable $ ___________ Taxes payable $ ___________ Notes, short-term (due within 12 months) $ ___________ Current part, long-term debt $ ___________ Other current liabilities $ ___________ Total Current liabilities $ $ ___________ long-Term Debt Bank loans payable $ $ ___________ Notes payable to stockholders $ ___________ LESS: Short-term portion $ ___________ Other long-term debt $ ___________ Total long-term Debt $ $ ___________ TOTAl lIABIlITIes $ ___________ $ Owners’ equity Invested capital $ ___________ $ Retained earnings - beginning $ ___________ Retained earnings - current $ ___________ Total Owners’ equity $ $ ___________ TOTAl lIABIlITIes & equITy $ $ ___________ 1-10 Arizona Entrepreneur’s Edge
  10. 10. worksheets Business planning and research From Idea to Business Income Statement Worksheet As of: __/__/_____ (3 previous years for existing business) yeAr 1 yeAr 2 yeAr 3 sAles $ ________ $ ________ _________ $ ________ Less Cost of Goods $ ________ _________ $ ________ $ ________ grOss PrOfIT $ ________ $ ________ _________ $ ________ OPerATIng exPenses $ ________ $ ________ Salaries and wages $ ________ _________ $ ________ $ ________ $ ________ $ ________ Commissions $ ________ _________ $ ________ $ ________ $ ________ $ ________ Outside labor $ ________ _________ $ ________ $ ________ $ ________ $ ________ Payroll taxes $ ________ _________ $ ________ $ ________ $ ________ $ ________ Advertising $ ________ $ ________ _________ $ ________ $ ________ $ ________ Car and delivery $ ________ $ ________ _________ $ ________ $ ________ $ ________ General office administration $ ________ $ ________ _________ $ ________ $ ________ $ ________ Legal and accounting $ ________ _________ $ ________ $ ________ $ ________ $ ________ Supplies $ ________ _________ $ ________ $ ________ $ ________ $ ________ Bad debts $ ________ _________ $ ________ $ ________ $ ________ $ ________ Rent $ ________ _________ $ ________ $ ________ $ ________ $ ________ Repairs and maintenance $ ________ $ ________ _________ $ ________ $ ________ $ ________ Utilities $ ________ $ ________ _________ $ ________ $ ________ $ ________ Insurance $ ________ $ ________ _________ $ ________ $ ________ $ ________ Taxes and licenses $ ________ $ ________ _________ $ ________ $ ________ $ ________ Depreciation $ ________ $ ________ _________ $ ________ $ ________ $ ________ Interest $ ________ $ ________ _________ $ ________ $ ________ $ ________ Miscellaneous $ ________ _________ $ ________ $ ________ TOTAl OPerATIng exPenses $ ________ $ ________ _________ ________ $ _______ PrOfIT/lOss BefOre TAxes $ ________ _________ $ ________ $ _______ ________ Arizona Entrepreneur’s Edge 1-11
  11. 11. From Idea to Business Business planning and research 1-12 Competitive Analysis Worksheet As of: __/__/_____ IMPORTANCE TO FACTOR MY BuSINESS STRENGTh WEAkNESS COMPETITOR A COMPETITOR B COMPETITOR C CuSTOMER worksheets Products Price Quality Selection Service Reliability Stability Expertise Company Reputation Location Appearance Sales Method Credit Policies Advertising Image Arizona Entrepreneur’s Edge